The crash occurred Friday morning at East 49th Street and King Drive.
Police said 23-year-old Dyanna Davis was driving on a suspended license, without insurance, had an outstanding warrant and didn't have the children in proper child restraints.
The children, ages 3 and 6, were taken to the hospital in critical condition and their conditions have since stabilized.
Police said a 2017 Hyundai Elantra carrying the two small children was T-boned by a Dodge Charger driven by a 23-year-old man.
Authorities said both children were traveling in the backseat of the Hyundai and were not properly restrained.
The driver of the Dodge Charger refused medical treatment at the scene, authorities said. He was cited for failing to reduce speed to avoid an accident.
Sun-Times Media Wire contributed to this report